South Windsor Officials Pushing For Approval Of Film Studio Project

Public Hearing Scheduled For Nov. 15

November 08, 2010|By JOSEPH A. O'BRIEN JR., Special to The Courant

SOUTH WINDSOR — — The race is on to win approval of a $25 million financing package for a proposed movie studio complex here before state legislators, facing a projected $3.4 billion state deficit, turn their budget knives on the state's film industry tax credits.

The town has set a public hearing for Nov. 15 at 7:30 p.m. to consider a proposal that would commit taxpayers to backing the sale of $25 million in bonds and using that financing to pay for public infrastructure improvements at the site where Connecticut Studios LLC intends to build a $50 million film studio complex.

Mayor John Pelkey has been pushing for the project's approval, saying that he wants to "move it along" before the state starts "monkeying around" with the tax credit programs.

Once the plan for the property at Route 5 and Chapel Road is approved, it would be eligible to receive the state's 20 percent tax credit available to the film industry on infrastructure costs such as studio construction. The state also offers a 30 percent film production tax credit, which Hal Katersky, the chief executive officer of Connecticut Studios, has said is the reason filmmakers are looking at Connecticut.

The state has already doled out $150 million in film industry tax credits, according to the state Department of Economic and Community Development's office of film, television and digital media, which directs the state's film industry incentive programs.

Uncertainty about the future of the tax credits, especially in light of the state deficit, has town leaders worried about the viability of the project, which is being funded by a combination of private and public investment.

Town Manager Matthew Galligan has said that he and town staff have spent many hours looking over the proposal to find the best deal for the town, not the developer.

"I have a difference of opinion with the developers on certain things," Galligan told the town council last week, explaining why a proposal was not already before them.

Differences of opinion also abound in the political arena. At last week's council meeting, Pelkey offered a public apology for an outburst with a resident during an earlier meeting. Donald Gonsalves, who has a background in finance, had wanted to speak with the council about financial projections for the Connecticut Studios project during the Oct. 18 meeting but never got the chance. Eventually, he disrupted the meeting by clapping his hands derisively, leading to a shouting match with Pelkey, who suddenly adjourned the meeting.

"After he banged the gavel, he came after me," Gonsalves said in a phone interview. "He was saying, 'You are disruptive! You are arrogant!' " Gonsalves said. "He is arrogant!"

"I just want to apologize to residents," Pelkey said last week after the council set the hearing date. "I think I lost my temper a little bit."

Questions about the financing have also arisen among council members. Republicans Kevin McCann and Thomas Delnicki, in particular, have requested more information about the scope of the project and the financial projections used to explain how holders of the tax incremental financing (TIF) bonds would be paid and when the town could expect to see tax revenues resulting from the project.

Initially, according to a report by the Connecticut Economic Resource Center Inc., Connecticut Studios had hoped to start construction on a $140.7 million project this summer. Included was $60 million for the studio, $50 million for retail space, $18 million for a hotel, $2.7 million for restaurants and $10 million for infrastructure improvements. The commercial space, restaurants and hotel are still envisioned as part of the project, but are being delayed because of the weak economy.

Under TIF, money received from the sale of bonds is used to make public improvements in a specified area. Property tax revenues resulting from the project are later "captured" for repayment of bonds instead of going into the town's general fund. In theory, the infrastructure improvements boost real property values in and around the project site, and thus lead to higher property values, and more tax money is collected.

Under present bond market conditions, property tax revenues from the Connecticut Studios project would be captured for 29.5 years.

"This is a far cry from what was presented a year ago," McCann said of the project as it was described in the purchase and sale agreement that the town signed with Connecticut Studios. The agreement also committed the town to making every effort, with or without a public hearing, "to the extent commercially reasonable" to provide $25 million in TIF financing for the project.

McCann said he found it "a little disturbing" that although the council has yet to vote on an agreement with Connecticut Studios, the town is already contractually obligated to secure the funding.

Town Attorney Dwight Johnson told the council that the town cannot walk away from the project at this point without exposing itself to liability from the developer.

Pacifica Ventures LLC, Connecticut Studios' parent which was also founded by Katersky, developed a similar studio venture, Albuquerque Studios LLC in New Mexico, a state that offers film industry tax rebates, not credits, of up to 25 percent, and other incentives. In July, however, Albuquerque Studios filed for bankruptcy court protection from its creditors as it reorganizes.

Though Johnson assured the town council that the Connecticut Studios project has no financial liability connected to Albuquerque Studios, the bankruptcy filing raises questions about the overall health of the film industry and its ability to sustain itself in Connecticut if the taxpayer funded credits were to shrink or vanish.

"This is not an easy task before us," Galligan said, summing up the work that's been done and that lies ahead.